Alliance Settlement Could be "Split" Decision

December 15, 2003 (PLANSPONSOR.com) - Published
reports indicate that settlement talks between Alliance
Capital Management and regulators are intensifying - and a
settlement could come as early as this week.

CBSMarketWatch notes that Alliance has offered to reduce
management fees for fund shareholders in an attempt to
stave off charges from New York Attorney General Eliot
Spitzer’s office related to improper fund trading – but
notes that other issues, including possible penalties and
the structure of any settlement, must still be resolved,
citing persons close to the situation (see
Alliance Capital
Proposes Fee Cut as Part of Settlement with Spitzer
).

Reports say that Spitzer wants New York-based Alliance
to promise it will cut the fees it charges investors as
part of the deal, but the SEC reportedly opposes this
approach, viewing it as unrelated to trading – and a matter
best left to their own rule-making.

The Securities and Exchange Commission, which will
likely be involved in a joint settlement, was believed to
have gathered Thursday in a closed meeting to consider the
Alliance proposal, according to published reports.

“We have been in discussions with Alliance and in
consultation with the Securities and Exchange Commission
regarding possible settlement,” Paul Laraby, spokesman for
New York Attorney General Eliot Spitzer in Albany, told
Reuters.
That same report noted that SEC Commissioner Roel Campos,
who refused to specifically discuss Alliance, said that
conceptually, “To argue that fees are somehow related to
market timing is like saying, well, in any business crime,
I can go anywhere.”
Campos, a former federal prosecutor, told Reuters, “We
believe that disclosure, in some light, is the way to deal
with these things. In January and February, we’re going to
be doing extensive rule-making in this area.”

Meanwhile, on Friday, North Carolina said it has
completed the first part of its probe of Alliance, and
expressed confidence that Alliance’s portfolio managers and
analysts responsible for North Carolina’s accounts (some
$6.2 billion worth) “were continuing to perform their
responsibilities in a diligent and unimpeded fashion.”
(see
Alliance Passes First Tar Heel State Review
).
Oregon currently has the mutual fund firm on its watchlist,
as does the Indiana State Teachers’ Retirement Fund.
Alliance manages about $3.3 billion for Oregon, and about
$2 billion for the Indiana fund.